Chinese travelers want luxury travel and hotels, a survey shows
Consumers in China plan to pay for hotels, according to a Morgan Stanley survey conducted in late January.
The study points to growing demand for high-end and luxury hotels in China after the country ends restrictions on domestic travel – and a Covid wave is over.
“Consumers appear more willing to increase spending on hotel accommodation for their trips compared to pre-Covid, with 20% citing this as their top travel expense, compared to 17% each in 2017 and 2020,” said analysts from MorganStanley.
The report, released on Tuesday, cites its own survey conducted Jan. 29-31 of about 2,000 consumers in China’s major cities in 19 provinces.
The report states that “37% of consumers prefer higher-star hotels, up from 18% in 2020, with higher-income consumers showing an even stronger appetite for luxury hotel stays (47% up from 31% in 2020).”
“Mentions of budget hotels and mid-range hotels generally decreased.”
The savings increased
Consumer propensity to save rose to record highs during the pandemic. Retail sales lagged behind China’s overall economic growth amid uncertainty about future earnings.
Morgan Stanley said the survey found a similarly muted appetite for shopping, despite it being considered the top spend for travellers. The shopping budget for travelers was 9,405 yuan (US$1,387) according to surveys in recent years, slightly higher than in 2020 but still well below 2017’s level of 13,782 yuan.
“The majority of consumers expect their total spending to remain flat over the next six months (70% versus 73% last month),” the report said.
But 24% of respondents said they plan to spend more to “upgrade their lifestyle” — an attitude that usually leads to buying high-quality products. That’s up 20% from a month ago, the report said.
“The rise in the number of consumers looking to improve their lifestyle with higher spending is universal.”
On leisure spending in China: “We don’t see any slowdown.”
Christopher J Nassetta
CEO, Hilton Worldwide
China’s per capita disposable income rose 2.9% to 36,883 (US$5,439) in 2022, according to the National Bureau of Statistics, excluding price factors. For urban households, disposable income rose more than $1,000 above national levels, the data showed.
An opportunity for international brands
Back in September, UBS analyst Xin Chen and a team said they expected people in China to pay for hotels after Covid died.
“The growing middle-/high-income population in China will continue to fuel demand for upscale hotels,” the UBS report says. “Currently, both the number of upscale and luxury hotel guest rooms and the brand penetration rate in China are lower than in North America.”
It can be an opportunity for international brands.
“We believe it will be difficult for Chinese hotel groups to enter the upscale market,” UBS said.
“China’s hotel groups are still exploring the upscale hotel market, and we believe that acquiring established foreign upscale brands could be their best option, and establishing joint ventures with real estate developers could provide property management resources for expansion into the upscale hotel market.”
InterContinental hotel group announced this week that it has signed two hotel deals in Shanghai, including the first hotel in Greater China under its luxury brand Vignette Collection. According to a press release, the hotels are scheduled to open in the first half of 2024.
intercontinental, Marriott International And Wyndham Hotels & Resorts are scheduled to release earnings later this month.
Hilton Worldwide Holdings said overnight in its fourth-quarter earnings report that an industry measurement of revenue for China showed business was still down 37% compared to 2019. China’s Covid controls also prevented the company from expanding as much as it had planned in the fourth quarter.
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“You’re already seeing a significant increase in travel within China,” Christopher J. Nassetta, CEO of Hilton Worldwide, said on a conference call.
“And we expect you’ll get a big tailwind from that, especially in the second half of the year,” he said, according to a StreetAccount transcript.
“There is still a broader pent-up demand in all segments. I mean, you could make an argument in the recreational space…people have been doing a lot of it, but we don’t see them slowing down.”
– CNBC’s Michael Bloom contributed to this report.
